#Capital Gains

The ITAT Surat ruled that for capital gains computation under Section 2(42A) of the Income Tax Act, the holding period commences on the date of the allotment letter, not the date of registration. This clarification enables purchasers of builder flats to qualify for long term capital gain treatment and claim exemption under Section 54.

The Kolkata ITAT ruled that the 10 % tolerance under Section 50C is retrospective, striking down the ₹9,94,312 addition for AY 2014-15 because the valuation gap was only 8.5 %. Taxpayers can therefore rely on the tolerance limit for past years, limiting exposure to Section 50C additions when the gap falls within the prescribed range.

The ITAT ruled that money spent on rebuilding an uninhabitable house can be treated as part of the purchase cost of a new residential property under Section 54F. This expands the pool of deductible expenses, allowing sellers of capital assets to claim a larger exemption on capital gains. Home-buyers and investors reinvesting sale proceeds in residential housing benefit.

The Bombay High Court ruled that proceeds from selling flats in a completed real-estate project are capital gains, not business income, because the seller’s intent was investment and the holding period was long. Hence, tax authorities must prove a trade-like activity, and developers will be taxed only on capital gains.

ITAT Bangalore allows ₹1.47 crore success fee paid to Singhi Advisors as deductible under Section 48(i) ITA, holding it was incurred wholly and exclusively for facilitating share transfer. The ruling clarifies capital gains computation for individual taxpayers engaged in share transactions.

The ITAT Ahmedabad affirmed that the Principal Commissioner can invoke revisional powers under Section 263 even after assessment is complete, if a subsequent DVO report proves the original valuation was materially understated, leading to significant revenue loss. This sets a critical precedent for tax authorities to act on credible post-assessment evidence that exposes deliberate or negligent undervaluation of capital assets.

ITAT Delhi rules that Section 50C cannot be mechanically applied to leasehold property transfers, mandating a District Valuation Officer report if valuation is disputed. The ruling clarifies procedural compliance for capital gains assessment on leasehold rights, impacting taxpayers and tax authorities.

ITAT Delhi rules that a valid sale agreement and subsequent proof of creditworthiness-even if established post-assessment-are sufficient to set aside Section 68 additions. This precedent strengthens taxpayers' defense against unexplained cash credit additions where property transactions are involved.

ITAT Delhi rules that the holding period for long-term capital gains on residential flats commences from the date of allotment, not possession, overturning the Assessing Officer’s short-term capital asset treatment. This decision clarifies tax liability for property investors and aligns with jurisdictional precedents, impacting capital gains calculations under the Income Tax Act.

ITAT Bangalore holds that claiming exemption under Section 54F does not require unutilized capital gains to be deposited in the Capital Gains Account Scheme if the new residential house is fully constructed within three years of sale, even if construction costs were incurred after the return filing deadline. This clarifies that actual completion, not mere deposit, is the decisive factor - benefiting taxpayers who reinvest gains in self-built homes with staggered payments.

The ITAT Delhi has ruled that interest earned on non-convertible debentures during the broken period between purchase and sale-paid by the buyer, not the issuer-constitutes interest income under 'Income from Other Sources', not capital gains. This clarifies a critical tax treatment for institutional investors trading NCDs in secondary markets, preventing misclassification that could distort tax liability and compliance strategies.

ITAT Pune rules that substantial payment and possession transfer under an agreement to sell qualifies for Section 54F exemption, even if the sale deed is registered years later. This clarifies that formal registration delay does not invalidate the exemption claim, offering relief to taxpayers in similar transactions.

The ITAT Bangalore has ruled that when an assessee provides credible documentary proof of actual payment - such as society certificates and payment receipts - the lower sale deed value cannot be used to compute capital gains. This sets a critical precedent for property buyers in cooperative housing societies, ensuring tax liability reflects true economic cost, not artificially understated deed values.

ITAT Kolkata has ruled that errors in an income tax return - such as incorrect LTCG computation - can be corrected under Section 154 if apparent from the record, regardless of whether the rectification changes the total income. This affirms that the scope of rectification extends to the return itself, not just assessment orders, reinforcing natural justice and the tax officer’s duty to ensure accurate computation under CBDT Circular 14/1955.

The ITAT Delhi has ruled that payments made to tenants for vacating a property before sale can be claimed as part of the cost of acquisition under Section 48 of the Income Tax Act, provided they are substantiated by contemporaneous bank records-even without a registered surrender deed. This clarifies a critical path for property sellers to reduce taxable capital gains, especially in high-value urban real estate transactions where tenant rights complicate clear title transfer.